EXPLANATORY STATEMENT
Social Security Act 1991
Social Security (Exempt Lump Sum – BT Funds Management Limited Remediation Payments) Determination 2022
Purpose
Paragraph 8(11)(d) of the Social Security Act 1991 (the Act) allows the Secretary of the Department of Social Services (the Department), or delegate, to determine, by legislative instrument, that an amount, or class of amounts, received by a person is an exempt lump sum for the purposes of the Act.
The Social Security (Exempt Lump Sum – BT Funds Management Limited Remediation Payments) Determination 2022 (the Determination) ensures that an amount paid by BT Funds Management Limited, as the trustee of Retirement Wrap ABN 39 827 542 991 Unique Superannuation Identifier BTA0287AU, as a ‘BT Funds Management Limited Remediation Payment’ to a person is an ‘exempt lump sum’ under paragraph 8(11)(d) of the Act.
A BT Funds Management Limited Remediation Payment is a lump sum payment made by BT Funds Management Limited to, or on behalf of, a person whose social security payment was affected by BT Funds Management Limited incorrectly reporting gross annual income amounts to the Secretary, or his or her delegate, for the purposes of the social security law.
By determining that a BT Funds Management Limited Remediation Payment is an exempt lump sum for the purposes of the Act, the amount of the remediation payment will not be considered income when assessing a person’s qualification for, and payability of, a social security payment.
Any BT Funds Management Limited Remediation Payment is intended to meet any shortfall in social security payments, or repayments of debts to the Commonwealth for overpayments of social security payments, made as a result of incorrect reports of gross annual income for some members of income stream products managed by BT Funds Management Limited.
Background
Exempt Lump Sums
Under the social security law, an income test is used to determine a person’s entitlement to a social security payment, and if they are qualified, the rate of a social security payment that is payable. An income amount earned, derived or received for a person’s own use or benefit is generally assessable as income (see the definitions of ‘income’ and ‘income amount’ in subsection 8(1) of the Act). However, some amounts that would otherwise be income are specifically exempted.
Paragraph 8(11)(d) of the Act allows the Secretary of the Department to determine that an amount, or class of amounts, received by a person is an ‘exempt lump sum’ for the purposes of the Act. An exempt lump sum is excluded from the subsection 8(1) definition of ‘ordinary income’, meaning the exempt lump sum amount is not taken into account under social security income tests.
The exemption of an amount received by a person from the income test does not alter the fact that any ongoing income generated by the amount is not exempt from the income test, and any assessable asset produced from the lump sum is counted under the social security assets test. This is consistent with the treatment of other amounts as exempt lump sums under paragraph 8(11)(d) of the Act.
BT Funds Management Limited Remediation Payments
BT Funds Management Limited (ACN 002 916 458) is a wealth management group that regularly reports their members’ gross annual income amounts to Services Australia where required to under the social security law. The amounts reported to Services Australia were subject to a BT system error that resulted in the disclosure of incorrect amounts of gross annual income in relation to the BT Super for Life income stream product.
As a result of this error, some members in receipt of social security payments were underpaid due to their gross annual income being overstated. Due to the operation of date of effect provisions under the social security law, no arrears of the underpayments could be paid by Services Australia.
Some members in receipt of social security payments were overpaid due to their gross annual income being understated. This resulted in debts being raised under social security law for the relevant overpayment. The members did not contribute in any way to this error occurring.
BT Funds Management Limited has identified all impacted members whose gross annual income amounts were incorrectly reported to Services Australia. The impacted members’ income stream information was provided to Services Australia to enable them to calculate any over or underpayments of social security payments.
BT Funds Management Limited undertook a remediation program to provide remediation payments to affected individuals in order to meet any shortfall of entitlement to social security payment as a result of the error, in addition to remediating the financial position of individuals who have a social security debt raised against them due to the error. Affected members were paid a BT Funds Management Limited Remediation Payment to their nominated bank account. These BT Funds Management Limited Remediation Payments do not represent receipt of money for services rendered directly or indirectly.
Affected members have received a letter from BT Funds Management Limited explaining the error that has been identified and advising that Services Australia has been subsequently provided the correct income information, as well as information on what to do if they are financially affected by more than the remediation amount paid.
The effect of this instrument is that the BT Funds Management Limited Remediation Payment payments made by BT Funds Management Limited will not be regarded as income under the Act. This prevents affected individuals from having their social security payments further impacted by these lump sum payments.
Retrospective Commencement
The Determination will be taken to have commenced on 1 December 2021. This reflects that remediation payments made by BT Funds Management Limited to affected persons commenced to be paid in December 2021.
Subsection 12(2) of the Legislation Act 2003, provides that a legislative instrument provision with a retrospective commencement will not apply to a person retrospectively to the extent that it would affect the person's rights so as to disadvantage them.
The retrospective commencement is designed to support affected persons and is intended to ensure that remediation payments made by BT Funds Management Limited will be treated as an exempt lump sum under the Act when received.
The retrospective operation of the instrument will not infringe section 12 of the Legislation Act 2003 because the retrospective operation would not disadvantage any person or impose a liability on a person other than the Commonwealth.
Consultation
Section 17 of the Legislation Act 2003 requires a rule-maker to be satisfied, before making a legislative instrument that any consultation the rule-maker considered appropriate and reasonably practicable, has been undertaken.
BT Funds Management Limited were consulted on the instrument. Consultation has also been undertaken with Services Australia on the changes needed to implement the Determination. Consultation was also undertaken with the Department of Veterans’ Affairs and the Department of Agriculture, Fisheries and Forestry.
Regulation Impact Statement (RIS)
The Office of Best Practice Regulation (OBPR) was consulted on 5 July 2022 and confirmed that the Determination does not require a Regulatory Impact Statement (OBPR Reference OBPR22‑02630). This Determination will operate in a beneficial manner. It is not regulatory in nature, will not impact business activity and will have no, or minimal, compliance cost or competition impact.
Availability of independent review
The Determination specifies that certain lump sum payments made under the Scheme are exempt from the social security income test.
A decision on the assessment of an individual’s income as part of the social security income test, which may involve a payment covered by this Determination, is subject to internal and external merits review under the Act and Parts 4 and 4A of the Social Security (Administration) Act 1999.
The Determination is a legislative instrument for the purposes of the Legislation Act 2003 and is subject to disallowance.
Explanation of the provisions
Section 1
This section states that the name of the determination is the Social Security (Exempt Lump Sum – BT Funds Management Limited Remediation Payments) Determination 2022.
Section 2
This is the commencement provision. It provides that the Determination commences on 1 December 2021. Remediation payments were first made in December 2021, so this commencement date ensures that all remediation payments will be captured by this Determination.
Section 3
This section sets out that the relevant legislative authority for making the Determination is paragraph 8(11)(d) of the Social Security Act 1991 (the Act).
Section 4
This section defines terms used in the Determination.
A note to the section alerts the reader that a number of expressions used in the instrument are defined in the Act.
‘Act’ is defined as the Social Security Act 1991.
‘BT Funds Management Limited’ is defined as BT Funds Management Limited (Australian Company Number 002 916 458) as the trustee of Retirement Wrap (Australian Business Number 39 827 542 991, Unique Superannuation Identifier BTA0287AU).
‘BT Funds Management Limited Remediation Payment’ means a lump sum payment made by BT Funds Management Limited to, or on behalf of, a person whose social security payments was affected by BT Funds Management Limited incorrectly reporting gross annual income amounts to the Secretary, or his or her delegate, for the purposes of the social security law.
‘Relevant period’ means 1 December 2021 to 30 June 2023.
Section 5
This is the operative provision of the determination. It provides that a lump sum payment made by BT Funds Management Limited between 1 December 2021 to 30 June 2023, to, or on behalf of, a person whose social security payment was affected by BT Funds Management Limited incorrectly reporting gross annual income amounts for the purposes of the social security law is an exempt lump sum for the purposes of paragraph 8(11)(d) of the Act.
The relevant period ensures that payments made by BT Funds Management Limited are covered by the instrument, in addition to ensuring that sufficient time is provided for BT Funds Management Limited to make payments to all impacted persons.
The relevant period is limited to avoid capturing new lump sum remediation payments for any potential, although unlikely, subsequent errors not considered by the Secretary in making this Determination.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Social Security Act 1991
Social Security (Exempt Lump Sum – BT Funds Management Limited Remediation Payments) Determination 2022
The Determination is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the legislative instrument
The effect of the Determination is that an individual who receives a remediation payment from BT Funds Management Limited, as the trustee of Retirement Wrap ABN 39 827 542 991 USI BTA0287AU, for the purposes of meeting any shortfall in social security payments, or repayments of debts to the Commonwealth for overpayments of social security payments, made as a result of incorrect reports of gross annual income for some members of income stream products will not have that remediation payment assessed as income under the social security law.
Human rights implications
The Determination engages the right to social security under Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR). The right to social security requires that a system be established under domestic law, and that public authorities must take responsibility for the effective administration of the system. The social security scheme must provide a minimum essential level of benefits to all individuals and families that will enable them to acquire at least essential health care, basic shelter and housing, water and sanitation, foodstuffs, and the most basic forms of education.
Under the Social Security Act 1991 (the Act), social security payments are subject to a means test which assess the income and assets of an individual to determine the level of social security payment the person is entitled to. Where that individual receives a lump sum, the whole or part of the lump sum is generally treated as income and would be assessed under the means test which could result in their social security payment under the Act being reduced.
The Determination will operate beneficially as a remediation payment made by BT Funds Management Limited will not be taken into account when assessing a person’s rate of social security payment under the income test. If the remediation payment is not exempted, a person in receipt of that remediation payment may not be eligible for a social security payment or, if they are eligible, their rate of payment might be reduced.
The exemption of the remediation payments from the income test on receipt does not alter the fact that any ongoing income generated by the lump sum is not exempt from the income test, and any assessable asset produced from the lump sum is counted under the social security assets test. This is consistent with the treatment of other lump sum payments as exempt lump sums for the purposes of paragraph 8(11)(d) of the Act.
Conclusion
The Determination is compatible with human rights as it supports a person’s right to social security.
Andrea Wallace-Green
Acting Branch Manager of the Payment Structures and Seniors Branch
Delegate of the Secretary of the Department of Social Services